Germany's glistening new capital on the Spree - capped by Sir Norman Foster's Reichstag dome - is the throbbing heart of a reborn First Reich, a secular and democratic variant of the Imperium Romanum Sacrum or Hohenstaufen Empire. Brussels has become a backwater again.

Half of Europe lives in trepidation of the mercurial Wolfgang Schäuble, the crippled idealist and mastermind of reunification whose own tortured emotions have become a Continental curse, and who entirely conformed to his reputation for irascible outbursts when I met him last week in the forbidding board room of Hermann Göring's Luftwaffe headquarters. The euro has delivered a "German Europe" after all.

This hegemony is as deeply troubling to the Germans themselves as it is to the rest of Europe. They too have been swept along by an EMU process that they do not fully understand, and that has left them with a string of awful choices.

"This is not what we aspired to," said a senior official. "The German political class has no aspiration to be number one. It is not our reflex to stick out and lead policy. We have done extremely well by not being in the forefront."

Ulrike Guerot from the European Council on Foreign Relations said Germany came dangerously close to rupture with Europe last year as the full shock of the EMU debt crisis hit home. Angela Merkel's Christian Democrats (CDU) flirted with raw nationalism. "We were like a car flying out of control on two wheels, and we nearly had an accident," she said.

I witnessed this first hand at a forum of Nobel Laureates last August in Lindau where German president Christian Wulff (since disgraced) stunned the room with a full-frontal attack on the European Central Bank, and with crude warnings that Germany had reached the limits of EMU solidarity.

Dr Guerot said the country came back from the brink when the CDU looked at its polling data and concluded that tickling for eurosceptic votes in Bild Zeitung waters did not pay. The party was losing support within the pro-EU centre at a faster rate. The twin currents of anti-EU and anti-immigrant feeling never came together to form a radical populist party along the lines of Marie Le Pen's National Front in France or Geert Wilders' Freedom Party in Holland.

Pro-EU sentiment has recovered to 57pc from a nadir of 40pc last year. Anti-Greek fury has subsided. "We have have reached a decision that Europe remains the collective wisdom for our country. The ruse of politics is to be generous," she said. Germany will have an aging crisis and three million Alzheimer's patients within five years. The Germans themselves will soon need Europe's help as history plays its trick.

That at least is the "good European" image that Berlin fervently wishes to present to the world, and wishes to believe itself. The four main parties in the Bundestag are all singing from the new hymn sheet. They tell foreign visitors - with slightly cloying faux solidarity - that they stand united in defence of the EU Project, whatever their differences over the exact pace of fiscal austerity.

"We are ready to do everything to guarantee the eurozone. Whatever the speculators try, we are the strongest economic zone in the world," said an opposition Social Democrat on the Finance Committee.

Yet, for all the rhetoric, little has changed. The austerity strategy imposed by Berlin on Europe's `Arc of Depression' - against the better judgement of the European Commission, the OECD, International Monetary Fund, and informed economic opinion across the globe - has not been modified in the slightest even though economic contraction has proved deeper than expected in every single victim country.

Spain is having to force through a net fiscal squeeze of 2.5pc of GDP this year during a savage recession, with unemployment spiralling towards six million by the end of the year. Italy is cutting by 3.5pc even though its budget is near primary surplus, and though its real M1 money supply is crashing at double digit rates.

Mr Schäuble talks of reducing debt in a "growth-friendly manner" but that is exactly what he forbids. He has embraced to the Puritan doctrine of "expansionary fiscal contraction" taught in German universities - but almost nowhere else in the world - which in its extreme form posits that a return to fiscal probity brings its own reward, even without the cushion of devaluation and monetary stimulus.

Germany went through its own austerity in the early part of the last decade while others were living high on the hog, and the memory understandably rankles. But as ex-Chancellor Gerhard Schroder says to deaf ears, he had to break the EU stability pact with deficits above 3pc of GDP at that time in order to cushion the pain of deep labour reform. Fiscal slippage was politically necessary, even in Germany.

It is hard to see how southern Europe could replicate the achievement in any case. Germany pulled off its restructuring feat during a global capital goods boom - in which it was uniquely placed to ride the rise of China by shipping machinery - and it did so when Club Med states were inflating merrily. All Germany had to do was to freeze wages for a few years and the ripe fruit dropped into its lap. It did not have deflate in absolute terms into a debt-deflation trap.

In fairness to Mr Schäuble, you could say that uber-austerity is the political cover he needed to clear the way for Mario Draghi's monetary blitz at the ECB, the net €530bn of extra liquidity (not €1 trillion) provided to banks. If that was the ploy, it has not entirely succeeded since there is generalized disgust across German public life at ECB largesse, and parts of the German policy machinery are now actively intervening to counter the effects.

The Bundesbank made clear last week that it stood ready to crush any sign of nascent demand in Germany, preparing to check "excessive credit growth", impose "maximum leverage ratios", and set "counter-cyclical capital buffers" to nip inflation in the bud.

Already alarmed by house price rises of 5.6pc in 2011, the bank is mulling "loan-to-value" limits. In other words, it looks as if Germany will not let inflation creep up to 3pc or 4pc over the next half decade to help rebalance the North-South gap in intra-EMU competitiveness.

The Bundesbank will use quasi-monetary means block the mini-boom needed in Germany to lift Club Med off the reefs. All the burden of adjustment will fall on the weakest states. The contractionary 1930s Gold Standard formula of assured destruction remains in place.

While Mr Schäuble has agreed to boost the EU firewall to €500bn - not the headline figure of €800bn, since €300bn is already committed to Greece, Portugal , and Ireland - it is revealing why erstwhile critics in the Bundestag seem willing to support the idea.

"The ECB takes decisions by majority vote but the ESM and the EFSF (bail-out funds) needs a unanimous decision, so it is easier for us to control proposals and enforce budgetary consolidation," said one member of the finance committee.

It is an argument you hear a great deal in Germany. Plans by the council of five `Wise Men' for a €2.3 trillion debt redemption fund to tackle the crisis have been widely seen in the rest of the EU as a softening in parts of the German establishment and a move towards EU fiscal union, but a key official behind the plan said the purpose was completely different.

"It is not a good idea to have the ECB distributing money in Europe. There is no longer any dividing line between fiscal and monetary policy, and Germany has no way to monitor and control what is happening," he said.

"The ECB is doing great collateral damage to the financial system. Banks are using it to gamble on resurrection. We have to get the ECB out of the game. Our idea is to go back to the Maastricht Treaty, not to go forwards to a fiscal union," he said. Big difference.

Emergency stimulus by the ECB is denounced across the political spectrum as "Anglo-Saxon ideology" at its worst. "Starting the printing presses is not the panacea: it leads to higher and higher debt and is not the way forward. As we have seen in the UK, the man in the street is practically expropriated," said a Social Democrat lawmaker.

Left and Right are united on this one point. The ECB is the villain. It has slipped the German leash. The corollary is that a stronger EFSF-ESM bail-out machinery is now viewed as the lesser of evils, an instrument that Germany can at least control.

Once you understand that, Germany's surprisingly calm acceptance of a bigger firewall takes on a different meaning. If there is any loss of faith in Calvinist austerity, it was not evident in Europe's new capital last week.